0xResearch

The Reboot | Uncommon Core 2.0 with Hasu and Jon Charbonneau

Mon Jul 17 2023

CryptoWritingMEVRoll-upsDecentralizationGovernance

Description

The episode explores various aspects of crypto, including the role of writing as a learning tool, understanding the workflow in crypto, deep diving into research, MEV and roll-ups, challenges in roll-up governance, decentralization and governance in roll-ups, centralized and decentralized sequences in roll-ups, proof of stake and governance in roll-ups, liquid staking and roll-up governance, governance of the super chain in roll-ups, and roll-up governance considerations.

Insights

Writing is essential for learning and understanding

Writing about complex topics helps in learning and understanding them thoroughly. It allows for feedback loops, building a brand, and networking with experts.

Understanding the workflow in crypto is crucial

Having a comprehensive understanding of the workflow and process in crypto is more important than pre-existing technical knowledge. Researching articles involves using primary sources, secondary sources, and talking to people.

MEV/transaction supply chain and roll-ups are closely connected

MEV/transaction supply chain and roll-ups are closely connected. Roll-ups need their sequencing needs met, and decentralizing the leader election mechanism in roll-ups is a challenge.

Governance plays a crucial role in roll-ups

The governance and control side of roll-ups is a thorny question that requires attention. The person or entity who controls the roll-up is more important than the exact sequencer mechanism. Governance should have the power to remove malicious actors and select trustworthy sequencers.

Decentralization and centralization have trade-offs in roll-ups

Roll-ups can choose a more centralized approach if it provides benefits like improved user experience or reduced custody risk. However, having an opt-out option is crucial for user control in roll-up systems. There will be a place for both decentralized and centralized approaches in the endgame of roll-ups.

Proof of stake and governance are important considerations

The need for proof of stake in roll-ups is questioned, and governance mechanisms may be sufficient. Implementing proof of stake leads to liquid-staking tokens becoming dominant. Dual governance can mitigate the principal-agent problem. Roll-up governance should have the power to pick sequencers and veto delegates.

Governance of the super chain is crucial

The governance of the super chain in the roll-up ecosystem will be crucial. Different chains may outsource their governance, and figuring out roll-up governance is a difficult problem. Opinionated governance will likely play a significant role in roll-ups' long-term success.

Roll-up governance considerations

Governance will become an important topic for roll-ups to figure out. Stewardship of smart contracts, control over updates, and sequencer decentralization are key considerations. Roll-up governance will have a lot of power and influence over decisions.

Chapters

Introduction
Writing as a Learning Tool
Understanding Crypto Workflow
Deep Dive into Research
MEV and Roll-ups
Challenges in Roll-up Governance
Decentralization and Governance in Roll-ups
Governance and Security in Roll-ups
Centralized and Decentralized Sequences in Roll-ups
Proof of Stake and Governance in Roll-ups
Liquid Staking and Roll-up Governance
Governance of the Super Chain in Roll-ups
Roll-up Governance Considerations

Summary

Transcript

Introduction

00:00 - 07:11

The podcast 'Uncommon Core' is back after a long hiatus with new co-host Jon Charbonneau.
The focus of the podcast will be on exploring the technology and incentives that make public blockchains work, with special attention paid to MEV, blockchain security, and roll-ups.
The values of the podcast, including deep curiosity and intellectual honesty, will remain the same.
The new co-host John Chabuno is deeply passionate about understanding and improving crypto infrastructure.
They spend a lot of time on Twitter to find information and do research.
Writing is an important part of processing information for them, as it helps them understand concepts better.

Writing as a Learning Tool

06:49 - 14:23

The last 5% of my reports, when I send them out to others, significantly improves the quality.
John is a prolific technical writer in crypto and his reports reflect his thought process while exploring various topics.
Writing about complex topics becomes easier when you are learning it from scratch and explaining it simply.
Writing helps in learning and understanding the topic thoroughly.
AI may make writing less important, but John would still write every report the same way even if they were not read by many.
Reading what AI writes won't help you learn as effectively as going through the process yourself.
Writing is essential for thinking and structuring thoughts on any topic.
Building a second brain through writing notes and connecting ideas enhances brain plasticity.
John joined crypto in March 2022 after being an obsessive hobbyist throughout 2021.
Learning through writing allows for feedback loops, building a brand, and networking with experts.

Understanding Crypto Workflow

13:56 - 20:49

Understanding the workflow and process in crypto is more important than pre-existing technical knowledge.
Having a comprehensive understanding of Ethereum in one place is difficult due to its vastness.
Finding interesting new ideas in crypto is easier if you are already focused on a specific area.
Outsiders can often see obvious things in crypto that insiders may overlook.
The social layer and community composition play a significant role in Bitcoin and Ethereum.
Researching articles involves using primary sources, secondary sources, and talking to people.

Deep Dive into Research

20:23 - 27:09

The speaker spends a month diving deep into a topic, ignoring other responsibilities and immersing themselves in research.
They start from the ground up, even looking up basic concepts like polynomials on Khan Academy.
Their computer is filled with open tabs related to their research.
After checking all the boxes and synthesizing information, they find it interesting to talk to people who have knowledge that isn't written down yet.
Their workflow has become shorter, usually taking a week or two for a report.
They split their time between focusing solely on the report and then catching up on other responsibilities.
The speaker's proudest moment was when Vitalik retweeted their Ethereum report after being in crypto for only a month.
Crypto infrastructure can be divided into several key areas including MEV/supply chain, protocol level thinking, rollups, scaling, consensus and security.
The boundaries between these areas are loose and overlapping.
The speaker spends most of their time working on MEV/transaction supply chain and roll-ups because they are closely connected.

MEV and Roll-ups

26:43 - 34:19

MEV/transaction supply chain and roll-ups are closely connected
Roll-ups need their sequencing needs met
Decentralizing leader election mechanism in roll-ups is a challenge
Flashbots is thinking about the best mechanism for roll-ups
Liquid-staking protocols are dominant in the staking area
Market dynamics of liquid staking have network effects
Best staking protocol should be decentralized and trustless
Infrastructure is important due to personal interest and innovation focus
Interest in technical aspects of infrastructure over NFTs or applications on crypto
Significant innovation has been happening on the infrastructure side, especially with roll-ups and scaling solutions

Challenges in Roll-up Governance

33:55 - 41:04

The podcast discusses the need for a new consensus algorithm to make blockchain more scalable.
The limitations of current blockchain applications are highlighted, including lack of privacy, efficient routing, and competitive decentralized exchanges.
Solving problems related to MEV (Miner Extractable Value), scalability, and security is crucial for building high-quality applications in crypto.
Roll-ups are discussed as a topic of interest, particularly their decentralization roadmap.
The speaker mentions that roll-ups are still in early stages of decentralization and progress has been slower than expected.
Sequencer decentralization is considered less important compared to controlling contract upgrades through multi-sigs or governance mechanisms.
Questions regarding the right approach to contract upgradability and governance in roll-ups are raised, including considerations of token holder control and instant upgrades for bug fixes.

Decentralization and Governance in Roll-ups

40:42 - 47:26

The governance and control side of Rollups is a thorny question that requires attention.
The person or entity who controls the roll-up is more important than the exact sequencer mechanism.
Decentralizing the sequencer does not necessarily solve issues like monopolistic pricing or censorship resistance.
Constraining the powers of sequencers is crucial, even if it means having one person in control.
Roll-ups need to make different trade-offs on thinking about MEV compared to Ethereum.
Decentralizing the sequencer in a completely permissionless way is difficult and may not be necessary for most roll-ups.
Governance should have the power to remove malicious sequencers.
Trustworthy sequencers can be selected by governance, with private mempools and no front-running.

Governance and Security in Roll-ups

47:05 - 54:14

Governance should have the power to remove malicious actors in roll-ups.
Roll-ups inherit censorship resistance from Ethereum.
Trusted operators can be used in roll-ups during the interim period.
Different chains have different requirements and goals.
Privacy and front-running protection are difficult on Ethereum due to high block time and geographic diversity.
Cosmos chains have their own validators and governance with the ability to slash misbehaving validators.
Roll-ups are decentralized because they post data and proofs to Ethereum.
Roll-ups can choose a more centralized approach if it provides benefits like improved user experience or reduced custody risk.
Having an opt-out option is crucial for user control in roll-up systems.
There will be a place for both decentralized and centralized approaches in the endgame of roll-ups.

Centralized and Decentralized Sequences in Roll-ups

53:53 - 1:00:16

There is a place for both centralized and decentralized sequences in the roll-up ecosystem.
Centralized sequences are being used early on to provide good user experience and build network effects.
Users can leave a roll-up if they have the option to opt out easily and retain control over their assets and data.
Decentralized social media platforms are harder to bootstrap because users cannot carry over their networks.
A clear opt-out option keeps operators in check and prevents monopolistic behavior.
Having a PBS auction, whether for centralized or decentralized sequences, is important to express preferences and avoid problems with private first in first out (FIFO) ordering.
Trusted mempools can be used by sequencers to keep user orders private while allowing bidding for block positions.
Governance should have more power in selecting trusted operators for sequencing, ensuring geographic distribution and accountability.

Proof of Stake and Governance in Roll-ups

59:50 - 1:05:58

Sonny tweeted that proof of stake was a mistake and suggested using governance pick instead
For Ethereum, relying on governance to select validators goes against the goal of being permissionless
For roll-ups, if they have robust governance mechanisms, there may be no need for proof of stake
Implementing proof of stake leads to liquid-staking tokens becoming dominant
The principal-agent problem arises when a third party like LIDO picks delegates for stakers
Dual governance, where stakers have veto rights, can mitigate the principal-agent problem
If most capital is delegated and slashing doesn't affect personal funds, its value is questioned
In the best case scenario, rollup governance picks sequencers and has veto rights over delegates
Questioning the need for a middle process if rollup governance can decide without staking tokens

Liquid Staking and Roll-up Governance

1:05:51 - 1:13:07

Liquid staking could be interesting for roll-ups as a way to delegate the selection of validators.
Governance in roll-ups can be challenging, and liquid staking offers a potential solution.
The argument that liquid staking would be the end game for roll-ups is not convincing.
Roll-ups already inherit decentralization from Ethereum, making them relatively trustless.
For chains with ambitions to become settlement layers, governance becomes more important than sequence selection.
Different layer two solutions have different plans and may not coordinate on implementing pre-compiles for verifying proofs.

Governance of the Super Chain in Roll-ups

1:12:47 - 1:19:05

The governance of the super chain in the roll-up ecosystem will be crucial.
Different chains may outsource their governance to optimism.
Figuring out roll-up governance is a difficult problem.
The vision behind the super chain is to have enhanced interoperability and shared standards across different roll-ups.
Shared sequencing and shared validity conditions are part of this vision.
There is a spectrum of trade-offs between having one monolithic chain and multiple chains with different standards.
Different applications will have different needs for interoperation and governance in the roll-up ecosystem.
Designing roll-ups differently from Ethereum makes sense due to their different use cases.
Opinionated governance will likely play a significant role in roll-ups' long-term success.

Roll-up Governance Considerations

1:18:47 - 1:22:00

Governance will become an important topic for roll-ups to figure out.
Stewardship of smart contracts and control over updates are key governance considerations.
Sequencer decentralization is another aspect of governance in roll-ups.
Roll-up governance will have a lot of power and influence over decisions.
Liquid-seeking protocols face challenges in marrying immutability, security, and decentralized governance.
There is a significant overlap between the roadmaps of Lido and roll-ups.
The podcast will be released every two to three weeks.